Please, Don’t Do Us Any Favors

     HOUSTON (CN) – The former campaign manager for Texas’ lieutenant governor defrauded people of $1.4 million, claiming he could get them a deal “as a ‘favor from the Republican Party,'” the investors claim in court.
     The plaintiffs claim Kenneth Barfield used some of his pilfered loot to buy shares in a Tequila start-up company, instead of buying collateralized mortgage obligations, as he promised.
     Barfield and his company Austin Properties LLC were sued in Harris County Court, by J. Cary Gray, executor of the estate of Fred A. Rizk; Rizk Interests Ltd., and Sylvia R. Rizk, trustee of the RRR Trust and Rizk GP Inc.
     Barfield was a political consultant for Lt. Gov. David Dewhurst, starting in 1998, when Dewhurst ran for Texas land commissioner, until December 2012, when Dewhurst accused him of stealing.
     Dewhurst sued Barfield in March 2012, accusing him of stealing more than $1 million in campaign money.
     In the new complaint, the plaintiffs claim Barfield promised them “100 percent of the interest earned … estimated to be $287,000 annually,” and said he would use their money to buy collateralized mortgage obligations.
     Gray and Rizk say Barfield cited his work for Dewhurst when he approached them in the fall of 2009.
     “On or about October, 2009, Barfield approached plaintiffs with a proposal to invest in two collateralized mortgage obligations (‘CMO’). Barfield explained that he had been Lieutenant Governor David Dewhurst’s campaign manager and ‘right-hand man’ for many years and claimed he would use plaintiffs’ money to purchase two CMOs that were being offered to Barfield at a rate far below market value as a ‘favor from the Republican Party,'” the complaint states.
     “Specifically, requested plaintiffs form a joint venture with defendants, whereby plaintiffs would provide $1,447,800 to purchase the CMOs. The CMOs would be held in the name of Austin Properties for the benefit of plaintiffs under the joint venture agreement. Barfield promised plaintiffs would receive periodic payments of interest generated by the CMOs.”
     Persuaded by Barfield’s pitch, Gray and Rizk say they gave him $1.4 million to buy CMOs under two joint venture agreements.
     “However, Barfield failed to use the funds as agreed,” they say in the complaint.
     They say Barfield used their money to buy different CMOs then the ones described in their joint venture agreements.
     When Barfield failed to make the promised interest payments, he “proposed to make various modifications to the agreed payment schedules,” but “failed to disclose to plaintiffs the actual whereabouts or disposition of the CMOs,” Gray and Rizk say. Then, “without any consultation, discussion, or permission from plaintiffs” Barfield relinquished control of the CMOs to an entity called MYRM Holdings, the investors claim.
     “In addition to the foregoing, and also unbeknownst to plaintiffs, defendants sold the Credit Suisse CMO and used the proceeds to purchase stocks in Visionary Ideas, Inc., a start-up Tequila company,” the complaint states. “After being forced to admit their wrongdoing, defendants subsequently assigned their ownership interest in Visionary Ideas, Inc. to plaintiffs.
     “Defendants failed make the payments required by the JV Agreements or Barfield’s subsequently-proposed payment schedules. As a result, on December 14, 2010, plaintiffs finally agreed to sell, and defendants agreed to purchase, plaintiffs’ interest in the JV Agreements and any assets acquired thereunder (‘the APA’).
     “Pursuant to the APA, defendants agreed to pay plaintiffs $1,875,000 in exchange for all of plaintiffs’ interest in the joint ventures and the joint venture assets.”
     But it was the same old son, Gray and Rizk say: “Defendants again failed to make the promised payments.”
     They want their $1.4 million back and punitive damages for conversion, fraud, fraudulent inducement, breach of contract, breach of fiduciary duty, and for violations of the Texas Theft Liability Act and Texas Securities Act.
     They also want a constructive trust set up for “all profits, monies, or economic benefits received or obtained by defendants as a result of their wrongful conduct.”
     They are represented by James Ormiston with Looper Reed & McGraw in Houston.

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